Monsanto rejects $62 billion takeover bid by Bayer

Monsanto has rejected a $62 billion takeover offer from crop science rival Bayer. Monsanto calls the offer incomplete and financially adequate but says it is open to discussion about a better deal.
 
Bayer made public its $122.00-per-share offer for Monsanto on May 23. The figure is a 37% premium over Monsanto’s share price of $89.03 on May 9, before speculation about a deal emerged. The German company responded to Monsanto’s rejection by saying it looks forward to further discussion while reiterating that its proposal provides “full and certain value for Monsanto shareholders.”

Bayer says the purchase would make it the world’s largest seeds and chemical firm, eclipsing the agriculture businesses being created through two other large, ongoing mergers: the combination of Dow Chemical and DuPont and the acquisition of Syngenta by ChemChina.

“Together we would draw on the collective expertise of both companies to build a leading agriculture player with exceptional innovation capabilities to the benefit of farmers, consumers, our employees, and the communities in which we operate,” Bayer Chief Executive Officer Werner Baumann said in announcing the offer on May 23.

In presenting the offer investors, Bayer executives emphasized how the two businesses complement each other. Bayer’s crop science division had $11.3 billion in sales last year, with 70% coming from crop protection chemicals. In contrast, of Monsanto’s $15 billion in sales, 67% comes from seeds and traits.

Moreover, Monsanto markets the majority of its products—57%—in the U.S., where Bayer would like to increase its business. Currently, Bayer’s sales are split almost evenly among Europe, Latin America, and North America.

Bayer also wants access to Monsanto’s burgeoning digital agriculture platform. Monsanto has invested in software and other technology used by farmers for precise planting, harvesting, and chemical applications.

The purchase of Monsanto by Bayer would be the third, and largest, consolidation move in the rapidly changing crop science industry. Although the purchase would likely attract antitrust scrutiny from regulators, Bayer said its lawyers are “very confident” the deal would obtain timely approvals.

After the acquisition, Bayer said, the combined seeds and traits business would be based in St. Louis, Monsanto’s longtime hometown, whereas the crop chemicals headquarters would be in Monheim, Germany. Bayer would maintain its agricultural research facilities in Durham, N.C., and digital farming initiatives would stay based near San Francisco.

The deal is not contingent on financing; Bayer would sell shares to pay for 25% of the transaction and has lined up bank financing for the rest. Board members unanimously approved the offer, according to the firm, “and are fully committed to pursuing the transaction.”

The investor presentation emphasized how the acquisition would benefit Bayer shareholders. In the first full year after the merger, Bayer said, earnings per share will increase “by a mid-single-digit percentage” and, in later years, by a double-digit percentage. It expects operating savings—so called synergies—to total $1.5 billion after three years.